The investment climate for LNG (liquefied natural gas) has changed in light of the Net-Zero report by the International Energy Agency (IEA). Confirms this is the Global Energy Monitor’s latest annual LNG report, according to which, despite the recovery from the pandemic, about 38% of total planned LNG supply in some parts of the world is facing significant investment decisions or other serious bottlenecks.
Simply put, investors are turning their backs on LNG projects as they see little prospect of a bright future in it. Due to the methane emissions and other climate-related disadvantages associated with LNG, it has almost lost its green energy status. The IEA report outlines a significant drop in gas demand in the coming years and a global shift to complete decarbonization of the power sector through renewable energy.
The Global Energy Monitor report now shows that LNG projects in Europe are facing financial challenges due to concerns over the gas’s climate impact. Meanwhile, exports to key regions such as the US are declining due to cheaper supplies from Qatar and Russia, and both are planning aggressive growth in LNG market share.
The report’s lead author, Lydia Plant, said: “These projects are so large that investors understand that it will not be easy to bear the loss.”
In the last one year, only one LNG project has reached a favorable financial decision. Due to Kovid-19, the cost has increased in the same way because in many places some work could not be done.
Global Energy Monitor today released the results of a worldwide survey of liquefied natural gas (LNG) terminal projects. The following are the highlights of the report, “Nervous Money: Global LNG Terminal Update 2021,”:
Despite the COVID recovery, at least 26 LNG export terminals with an overall capacity of 265 million tonnes per annum (MPTA) continue to report delays or other serious disruptions in Final Investment Decision (FID) – being developed worldwide. 38% of the export capacity of 700 MTPA.
The Mozambique LNG terminal became an example after the rebel attack and this incident has exposed the vulnerability of terminals worth billions of dollars.
Rising costs, delays in scheduling, and high failure rates that plagued the LNG sector were exacerbated by COVID-related workforce disruptions over the past year.
Considered as a one-time potential climate solution, the LNG sector is increasingly being viewed as a climate problem, especially for European buyers. According to the IEA, intra-regional LNG trade will need to decline sharply after 2025 under a net zero scenario of 2050.
Globally, only one LNG export project has reached FID in the past year, the Costa Azul LNG terminal in Mexico.
North America accounts for 64% of global export potential in manufacturing or pre-manufacturing. The most troubling recent projects are also in North America, with 11 out of 26 LNG export terminals reporting significant financial decisions delays or other serious disruptions.
Lower production costs Qatar and aggressive expansion of capacity in the Russian Arctic have increased risks for United States LNG export developers.
LNG import capacity continues to expand rapidly, with enough projects in construction or pre-construction to increase global capacity by 70%. Of the manufacturing or pre-construction capacity, 32% is in China, 11% is in India, and 7% is in Thailand. Outside Asia, Brazil is a hotspot with 13 LNG import terminals in construction or pre-construction.
The report’s lead author, Lydia Plant, said, “LNG was sold to policy makers and investors as a safe, clean, safe alternative. Now all those attributes have turned into liabilities. The sheer volume of projects has disastrously disastrous for investors.” And the recent IEA 2050 scenario suggests there is no place for LNG in a climate-safe energy future. The industry has lost its climate halo, and the only question is whether the Biden administration has potential. The white elephant will waste precious political capital to take forward (expensive, cumbersome and useless) projects.”
Ted Ness, executive director of Global Energy Monitor, said, “Those who are used to thinking of infrastructure as a ‘safe’ investment may face a rocky ride in terms of LNG terminals. Greater export potential Opportunities for construction have dwindled, and North American projects have lagged behind for a number of reasons. They are rightly viewed as too unhygienic, especially by European buyers, because of their reliance on fracked gas. Qatar and Russia both have access to cheap gas, and they are not going to give up market share.”